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Tuesday, May 17, 2022

Angeles Equity, Clearlake Capital Unload Lumber Business

Santa Monica-based private equity firms Angeles Equity Partners and Clearlake Capital Group have agreed to sell their lumber and building material business to US LBM Holdings in what one analyst describes as a potential $1 billion sale.
US LBM’s purchase of American Construction Source creates the second-largest business in the specialized industry, according to Craig Webb, an analyst with Webb Analytics, a Washington, D.C.-based trade consulting firm that tracks data and other trends in the lumber and building supply market.

Dallas-based Builders FirstSource Inc. is the largest building materials company in the United States with estimated revenue between $13 billion and $14 billion.

Webb estimates US LBM will have 2020 sales of $5.09 billion once the deal is completed. The national ranking excludes big-box lumber yards like Home Depot Inc. and Lowe’s Cos. Inc.

Webb said he based his estimated $1 billion price for the deal on recent acquisitions by US LBM and Builders FirstSource.

“This is the best of times to sell,” said Webb, who noted that US LBM has been on a buying spree of late.

Terms of the private transaction were not disclosed.

“The PE-driven players are aggressive buyers in this space. They are trying to grow as fast as they can, so they’d rather make a billion-dollar deal than a few thousand,” said Larry Morgan, a Jackson Hole, Wyo.-based independent sales agent for the industry.

Angeles Equity and Clearlake created Springfield, Mo.-based American Construction Source with the goal of creating a leading national building materials distribution platform for custom homebuilders and repair and remodel contractors. Since 2018, Angeles Equity and Clearlake have teamed up for nine deals under the ACS name.

American Construction Source serves residential builders with a focus on custom homebuilders, repair and renovation contractors, and sophisticated do-it-yourself consumers.

The sale of ACS triggered a Hart-Scott-Rodino review by the Justice Department to determine if the combination is anti-competitive in the industry. The fact that it caused a review means the deal had a value of more than $200 million, observers said.

Webb said the industry is consolidating rapidly. He pointed to a deal announced last week in which Builders FirstSource agreed to pay $400 million to buy Phoenix-based Cornerstone Building Alliance SW. Cornerstone had revenue of $330 million as of April, he said.

American Construction Source reported 2020 sales of $703.2 million, with 1,600 employees, according to ProSales, a trade magazine for building supply dealers and distributors. US LBM reported 2020 revenue of $4.26 billion, with 9,350 employees.

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